The Nominal Effective Exchange Rate (NEER) is a more accurate indicator of a country's international trade competitiveness than the Real Effective Exchange Rate (REER) because it adjusts for domestic inflation differentials.
- True
- False
Answer: False
The reverse is true. NEER is simply an unadjusted, weighted average of a country's currency relative to a basket of its major trading partners' currencies. REER adjusts the NEER for the inflation differentials between the home country and its trading partners, making REER the true measure of a nation's export competitiveness in global markets.